The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow Mountain Racing Bikes S 926,000 $ 265,000 404,000 257,000 476,000 114,000 208,000 154,000 Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 450,000 51,000 196,000 103,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 69,800 44,100 115,200 185,200 8,800 20,400 40,200 53,000 40,400 8,000 39,000 80,800 20,600 15,700 36,000 51.400 Total fixed expenses 414,300 122,400 168,200 123,700 Net operating income (loss) 35,700 28,600 27,800 $ (20,700) Allocated on the basis of sales dollars Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out Required a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Difference: Net Total If Racing Bikes Are Dropped Operating Income Increase or Decrease) Current Total ales ariable manufacturing and selling expenses Contribution margin (loss) Fixed expenses: Advertising, traceable Depreciation on special equipment Salaries of Common allocated costs managers Total fixed expenses Net operating income (loss) b. Prepare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes Sales ariable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses Advertising Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin Common fixed expenses Net operating income (loss)